Summary:
- DAX (DE30) pulls back after reaching 200-week moving average and the 61.8% Fibo level
- The German index trades within an uptrend channel
- A decline towards the 11800 pts handle can be on cards
The beginning of the new week on the global stock markets is far from good for bulls. Indices all around the world are pulling back amid threat of trade war escalation. DAX (DE30) is no exception. The German index pulled back after reaching the 200-week moving average and the 61.8% Fibo level of the latest major leg lower. As one can see on the chart below, tests of the aforementioned moving average were often followed by reversals (red circles). However, some kind of a deeper pullback could be justified given stunning rally started at the turn of the year.
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Source: xStation5
Moving onto a daily frame, one can see that the resistance zone around the 12400 pts handle is additionally being strengthened by the upper limit of the upward channel. Potential range of the pullback in case the index was to reverse may take the price as low as to 11800 pts handle. In this area one can find 50-session moving averages channel and the 200-session moving average, what may prove to be a hurdle for sellers (red circle on the chart below).
Source: xStation5
Some kind of a correction seems to be justified by both, technical and fundamental factors. Having said that, we can try to look for levels where bulls may become more active. The first such level can be found in the 12000 pts area. Apart from being the psychological levels, it is also being marked by the 38.2% retracement level and the local peak from 4 April. The next support level in line can be found at 11870 pts handle (50% Fibo level and local highs/lows). Nevertheless, the lower limit of the upward channel should serve as the ultimate support level. This year’s highs around 12400 pts handle remain to be the first resistance zone to watch.
Source: xStation5
